Australian Consumer Law (ACL) is an Australian national law that applies to all Australian jurisdictions and industry sectors. As a small business owner, you have obligations.
A more general guide on your legal obligations can be found in our guide on Australian competition and consumer law. This guide aims to look specifically at the ACL’s implications to ensure you understand your obligations and comply.
The Australian Consumer Law (ACL) includes:a national unfair contract terms law covering standard form consumer and small business contracts; a national law guaranteeing consumer rights when buying goods and services; a national product safety law and enforcement system; a national law for unsolicited consumer agreements covering door-to-door sales and telephone sales; simple national rules for lay-by agreements; and penalties, enforcement powers and consumer redress options.
WHY should I care about my legal obligations?
The ACL covers general standards of business conduct, prohibits unfair trading practices, regulates specific types of business-to-consumer transactions, provides basic consumer guarantees for goods and services, and regulates the safety of consumer products and product-related services.
There is significant government legislation associated with this subject, and lack of knowledge is not an acceptable defence. Significant fines apply for breaking the rules to ensure unfair activity does not occur.
WHAT ACL laws do I need to understand?
Australia Consumer Law (ACL)
- Unfair contract terms – This protects a business or consumer when they agree to a standard contract that is subsequently deemed unfair. For example, terms change, you agree to a price, but the price is changed without notice.
- Consumer Guarantees – applies to a consumer or business that purchases a product for less than $40,000. The guarantee is that a good or service will meet certain minimum standards. For example, a consumer buys a washing machine for $2000 with a 1-year warranty. After 2 years, the product fails. Under ACL, the consumer can claim that this product should have lasted more than 2 years and should be repaired or replaced.
- Consumer product safety – As a business owner who sells a product, you must be aware of mandatory standards or voluntary rules around your product’s safety. You will also have obligations around bans or recalls. For example, you cannot sell children’s toys with small detachable parts that could be swallowed.
- Sales practices – The ACL prohibits businesses from using unconscionable conduct when selling, the unsolicited supply of goods, unsolicited consumer agreements, harassment and coercion, or refusing to provide proof of a transaction when dealing with their customers. For example, you cannot try to trick someone into buying your service nor threaten them or refuse to give them a receipt if they ask for one.
- Avoiding unfair business practices – The ACL prohibits businesses from engaging in unconscionable conduct, including misleading or deceptive conduct and representations. For example, you cannot do an advertisement with disclaimers that are too small to read. Nor can those disclaimers change the main meaning of that advertisement, for instance, when the ad implies the item costs $50 but a condition in fine print means the real cost is $75.
HOW do I comply with Australian Consumer Law
Unfair contract terms
A contract can include two parties signing a document, agreeing over the phone, clicking an “I agree” button on a web page, or acting according to a contract after indicating acceptance of the contact.
As a small business, you are responsible for upholding contracts and ensuring that the contract is not unfair. Very simply, you cannot change the terms after an agreement is made just because it suits you. A contract could be classed as unfair if you have not balanced the terms between you and the customer. This could be everything is in your favour, or you are abusing your customer’s interests, or the contract could cause detriment to your customer.
Suppose you sell a product or provide a service for personal, domestic or household purposes. In that case, you are obligated to ensure that product is fit for the purpose it was bought. The important implications of the law is that a warranty end date does not end your obligations. You cannot replace consumers rights, for example, a ‘No refunds’ sign is unlawful, and you cannot have a customer sign a document waiving their rights, nor can you have them sign or agree they will not claim consequential losses from you.
Goods sold to a customer must be of acceptable quality. You must guarantee this to the point that it is considered reasonable that the good should last. Say you bought a TV with a 2-year warranty and after 3 years, it stops working. The TV should have lasted longer than 3 years so a customer could claim repair or replacement under ACL. This period is not set in stone and would be reviewed by the court based on each circumstance. Note a consumer loses those rights if the product failure was caused by commercial use or malicious damage. As a product seller, it may be cheaper for you to repair or replace an item rather than being taken to court by the ACCC.
If a consumer orders a product based on a sample or model, you are obligated to deliver goods that match that sample and specifications.
You have an obligation to provide repairs and spare parts for a reasonable time after a good is sold. Alternatively, you are obligated to provide a replacement.
Suppose the product or service does not meet the consumer guarantee. In that case, they have the right to demand resolution from the supplier (retailer). Note, although the manufacturer is also obligated, it is the selling party’s responsibility to resolve. Thus, you cannot simply expect the manufacturer to handle this for you if you sold it.
From a services perspective, there must be a level of skill or technical knowledge when providing a service and all necessary care must be taken to avoid loss or damage when providing that service. The services must be fit for purpose and delivered within a reasonable time. If you fail to provide this, the consumer can cancel the service and get a refund for work not already done or keep the contract and get compensated for resolution.
Consumer product safety
Under the ACL, Australian ministers can regulate unsafe consumer goods and product-related services by:
- issuing safety warning notices
- banning products, either on an interim or permanent basis
- imposing mandatory safety standards; and
- issuing compulsory recall notices
These rules relate to personal, domestic or household use or consumption. More information on product safety can be found here.
Your obligations are to sell something that is safe and not banned. This may include how it is made, what it contains, how it is designed, tests it needs to pass and whether warnings or instructions need to accompany the goods. If you do not comply, you may be required to recall your goods at your cost if a consumer suffers loss or damage. As a result, a court can award compensation to cover the losses.
Your business cannot issue an invoice or request payment for good and services that have not been requested. For example, you can not send an advertising invoice to a customer who has not requested advertising, nor can you send someone a book unprompted then demand payment. The maximum fine is $220,000 for an individual and $1.1 million for a body corporate.
If you decide to engage in unsolicited consumer agreements, including door to door selling, cold calling on the telephone, or approaching people in the shopping centre, you must observe certain conditions. These include limited hours for contact with consumers, disclosure requirements when making an agreement, criterion for the sales agreement, including that it must be in writing, supplying goods above $100 value, and on requesting payment during the cooling-off period. The customer has a 10-day cooling-off period to change their mind and cancel the contract. If you do not meet your obligations as part of the contract, the customer has right to cancel in a 3- or 6-month period. Unsolicited consumer agreements can lead to maximum civil and criminal penalties of $50,000 for a body corporate and $10,000 for an individual.
Pyramid selling is illegal in Australia. A Pyramid scheme is where people make money from recruiting participants who pay a fee, and all those in the chain above receive a share of that payment.
If you are selling, you must sell a good at the lowest displayed price or withdraw the product from sale until rectified. Mistakes made in advertising can be fixed by publishing a retraction with similar circulation. You may also not quote a price that is a component or only part of its cost. For example, if a lounge is priced at $500, but the customer is also charged a $20 fee to pick the lounge up at the store they have just purchased from.
You cannot convince a consumer to buy goods or services by promising benefits dependent on other events. For example you can’t offer a customer a discount on the condition that they help you find other customers. The maximum fine is $220,000 for an individual and $1.1 million for a body corporate.
You cannot use physical force, coerce or unduly harass someone for the supply of or payment for goods or services, this includes verbal intimidation. The maximum civil and criminal penalties for harassment and coercion are $1.1 million for a body corporate and $220,000 for an individual.
If you sell goods or services to the value of $75 or more, you must prove that transaction. This could take the form of a GST invoice, cash register receipt, credit card statement, handwritten receipt or receipt number for a telephone transaction. The customer has the right to ask you for an itemised bill, including how the price was calculated, including hours and materials if relevant. The maximum civil penalties for failing to provide consumers with proof of a transaction or not providing it within the required time are $15,000 for a body corporate and $3,000 for an individual.
Avoiding unfair business practices
You must not make statements that are misleading or deceptive as part of your sales or marketing activities or are likely to mislead or deceive. Failing to disclose information also falls into this. A disclaimer cannot be used to counter any of this conduct. If you do mislead or are deceptive, the court may order you to make remedies.
You cannot make false or misleading representations about goods or services when supplying, offering to provide, or promoting those goods or services. For example, this vitamin will extend your life by 20 years. Making false or misleading representations is an offence. The maximum fine is $220,000 for an individual and $1.1 million for a body corporate.
You must not engage in unconscionable conduct within societies norm and expectations. For example, you cannot explain the conditions of a contract and get an agreement in English to someone who does not speak English or might have a disability. The maximum civil penalties are $220,000 for an individual and $1.1 million for a body corporate.
If you decide to make a country of origin claim about your product as either words or an image, it must not be false or misleading. Made in Australia must be made in Australia. The definition of made in Australia is the goods must be substantially transformed in Australia, and 50 per cent or more of the total cost of producing or manufacturing the goods must be in Australia.
For more details available directly from the Australian Government, see this page for resources and guides.
SUMMARY – Australian Consumer Law
This document is a Summary of Australian Consumer Law to help you understand the implications. It should be used as informational only. You should read the guides made available by the Australian Government to fully understand its impact. ACL must be adhered to and being in business, you could find yourself in court and subsequent penalties if you do not do the right thing.